The former boss of London Underground is to run one of Britain's largest public transport groups after Tim O'Toole was confirmed as the new chief executive of FirstGroup.

The 55-year-old US citizen will replace Sir Moir Lockhead, who is retiring after 21 years at the helm of the Aberdeen-based bus and rail group. O'Toole won extensive plaudits during his six-year stint running the capital's tube network, which included dealing with the aftermath of the 7 July bombings and the collapse of Metronet, the underground's main public private partnership contractor.

However, the announcement was dominated by eulogies for FirstGroup's founder. Sir Moir said his greatest achievement came at the beginning of his tenure at FirstGroup in 1989, when he led the buyout of Grampian Regional Transport – a business with 500 employees and £15m of revenues.

"If I had not been able to buy the company here in Aberdeen we would never have got off the starting block."

FirstGroup is now a global public transport group, including an extensive US business, with a turnover of over £6bn and more than 130,000 employees. Its rail operations include the First Great Western and First Capital Connect operations, while its bus unit includes networks in London, Leeds, Manchester and Edinburgh.

O'Toole will formally take over on 1 November, less than a fortnight after a comprehensive spending review that is expected to put severe pressure on taxpayer subsidies for FirstGroup's businesses. The so-called big five public transport groups: – FirstGroup, Stagecoach, Arriva, Go-Ahead and National Express – benefit from a £500m fuel subsidy for the bus industry and support payments for rail franchises if they are struggling to meet revenue targets.

O'Toole acknowledged that the public transport industry is facing a "challenging" few years if there are substantial cuts to the Department for Transport's £15.9bn budget. "There are large challenges that we are facing here," he said, referring to the threats to bus funding and reform of the rail franchise market. However, O'Toole said FirstGroup's scale, including the Greyhound coach operation in the US and a Cincinnati-based school bus business, would shelter the business from the worst of the cuts.

"This company has such breadth and residual strength that if anyone can take on these difficulties it is this company," he said. FirstGroup's share price has fallen 12% over the past three months. Currently deputy chief executive of the group, O'Toole said he would split his time 50/50 between the UK and US, adding that he had no plans to move FirstGroup from its Aberdeen headquarters.

O'Toole is no stranger to negotiations with ministers over state funds, having helped secure £2bn of support from the Department for Transport in the wake of the Metronet collapse. In one of his last acts as London Underground's managing director, O'Toole said Londoners should "scream bloody murder" if a key Metronet project, the upgrade of the Metropolitan, District, Circle and Hammersmith & City lines, is delayed or scaled back because of funding problems.

FirstGroup's chairman, Martin Gilbert, said O'Toole's experience at the tube was a key factor in his appointment. "A major part in the board's decision was the feedback, and experience, that Tim had in running London Underground."

Gerald Khoo, analyst at Arbuthnot Securities, said: "This is positive short and long term. Although he did a great job in building up the group, the outgoing CEO is widely seen as an obstacle to the restructuring the group needs, such as selling off underperforming businesses."